CCI to frame regulations to decide the penalty levied on companies

NEW DELHI: The competition regulator will frame clear regulations to decide the penalty it imposes on companies found guilty under anti-competition laws in a bid to ensure that its orders pass the scrutiny of appellate authorities.

The penalty provisions in the Competition Act, 2002, allow the commission to levy a penalty on a company not exceeding more than 10% of the average turnover for the last thee preceding financial years if charge of dominance of abuse has been proved.

However, it is not required to explain how it arrived at the exact percentage.

"A lot of the cases are being challenged in the appellate body and this issue is likely to come up. We are contemplating enlisting the procedure that is used in setting the fines," explained a member of the Competition Commission of India.

The appellate authority has asked for the guidelines followed by the commission in levying the penalty on the company at the rate of 9% of the last three years average turnover.

"Although calculation of profit will vary on a case-to-case basis for all infringements but still there is a clear need to articulate how it (CCI) determines the basic amount of the fine, what components it adds to it and how it differs for horizontal and vertical price fixing etc," elaborated a lawyer dealing with competition cases.

In the DLF hearing too, the appellate authority referred to workings in most advanced economies where there are detailed guidelines on the imposition of fines.

"The enforcement of the competition law is still new and the CCI is also on the learning curve. It has done well to pin down several cartels. But in respect of the proportionality of the fines, the CCI may like to consider the approach of some other competition authorities, and also issue guidelines on this subject," said Vinod Dhall, former Chairman, CCI.

The Act in its current form allows the competition watchdog to issue regulations regarding procedures on its own without having to approach the Cabinet which is a time consuming process.

"We need to simply issue a regulation to add the guidelines under section 27 of the Act. There is no need of an official amendment which would have required the cabinet approval," the member said.